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How Is Mezzanine Debt Repaid?

How Is Mezzanine Debt Repaid?

Submitted by • September 10, 2020 www.attractcapital.com

Mezzanine debt is strategic capital that is raised to propel the growth rate of a company. Its cost requires a high value use for it to be beneficial for the issuer. At closing, the mezzanine loan is structured upon the company’s future cash flow value, as determined by the lender. This value is used as a proxy for the enterprise value of the business upon a sale or exit. If the lender buys into a future cash flow value of $20 million, they may assign a debt capacity of 70% to the company and provide a loan up to the 70% loan to value or $14 million.

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